In Brulotte v. Thys Co., 379 U.S. 29 (1964), the Supreme Court drew a bright line rule that royalty payments beyond the expiration of a patent were unlawful. However, many think that a case involving Spider Man might be the undoing of that case.
In Kimble v. Marvel Enterprises, 727 F.3d 856, 857-58 (9th Cir. 2013), Kimble invented a glove that allows the shooting of foam string from the hand, like Spider Man. Kimble approached Marvel and discussed the idea covered by the then-pending application, and other “ideas and know-how.” Marvel declined participation in the toy and other ideas, but according to Kimble, verbally agreed to compensate Kimble should Marvel use any of the discussed ideas. Some time later, Marvel introduced the “Web Blaster,” a product that was similar to Kimble’s and which allowed the user to shoot foam string from a can mounted on the wrist. Kimble brought suit. The court granted Marvel summary judgment on the patent infringement claims, but a jury later found in Kimble’s favor on the contract claims. While on appeal, the parties reached a settlement, wherein Marvel agreed to buy Kimble’s patent for a lump-sum payment and further agreed to a 3% royalty on “net product sales,” which included products that would otherwise have infringed the patent, as well as, Web Blaster sales. The settlement agreement and the royalty obligations had no expiration date. Marvel ceased payments after the patent expired.
Kimble filed suit for breach of contract. The trial court held that the royalty provision was unenforceable after the expiration of the patent, citing Brulotte. Kimble appealed and the Supreme Court granted certiorari.
Pitting antitrust law v. patent law, at issue is whether the freedom to contract trumps stare decisis. That is, can parties privately agree to extend royalties beyond patent expiration despite the holding in Brulotte?
The decision will have a far-reaching effect, for example, as in the life sciences industry where new drug products often come to market late in the 20 year patent term. Supporters of Brulotte contend that problems, such as the term of the patent, should be addressed by Congress, while those supporting overturning Brulotte, contend that more flexibility in negotiations is of greater importance than maintaining a rigid rule. The decision will either maintain a 50 year status quo, or could substantially offer new avenues in negotiations regarding patented technology and products.
Anna Vradenburgh is a well-respected, business-minded expert in intellectual property issues. As a patent attorney licensed to practice before the United States Patent and Trademark Office, Anna assists clients in patent and trademark prosecution, and represents clients in trademark opposition matters, domain name dispute matters, and patent and trademark litigation. Anna can also assist your company in all manner of intellectual property protection. For more information, visit her website, or contact Anna at (818) 946-2300. This article is for educational purposes only and nothing in this article is intended to be, nor should be considered legal advice.